Examining The Forecast

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Earlier this week the February budget forecast was released and while news reports have indicated that the state will enjoy a $2.2 billion surplus over the next biennium, it is important for the people of Minnesota to realize that this surplus isn't as big as it appears.

There are several reasons why this is the case. Most significantly, recent budget forecasts did not account for inflation. Several years ago, inflation was taken out of the budget formula in an accounting gimmick designed to help eliminate the deficit. This is a bad accounting practice that leaves the state with fictitious budget forecasts and creates unrealistic expectations.

Another billion of the surplus is one-time money left over from the last biennium, not a continuing amount that we can depend on in the future. As you can see, after we account for inflation and take out the one-time money, we don't have much of a surplus at all. For this reason, I think that we must approach this small surplus with fiscal restraint.

We may not have the huge surplus that some thought we did, but we are not in deficit either. The good news is we will not have to make any of the budget cuts that have characterized recent sessions. We do, however, need to have a serious conversation about where our priorities lie as a state.

The budget outlook may not be as bright as some would have you believe, but I still believe that we can improve our schools, reform our health care system, and provide significant property tax relief. While these are not easy tasks, I am certain that this new legislature is up to the challenge.

Other aspects of the February forecast were more troubling. January's employment statistics were revised to show that the job market was actually flat. In addition, the forecast showed that housing starts have continued to decline, confirming that the housing market is slowing down. Both statistics indicate trouble for the economy.

In order to combat an economic slowdown, the Legislature should invest in the things that make Minnesota attractive to business and create a climate that will promote job creation. This means investing in our schools – as a highly educated workforce has been the secret to our success as a state. It also means investing in our transportation system, so business can move their goods and employees don't waste time and money in long commutes. Finally, it means stemming the rapid increase in property taxes by passing permanent and fair property tax relief.

The February forecast doesn't contain all the answers, but it does give us a clear picture of where we stand as a state. As has often been said, everyone is entitled to their own set of opinions, but not their own set of facts. Now that the facts are in, we can work together to solve the problems facing Minnesota and make the investments that will guarantee Minnesota's success far into the future.

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